International Trade Committee on June 4th, 2021

[Arun Alexander]

I'm sorry. I don't know that. Maybe I'll ask Colin if he has any information on pricing, but I'm sorry: I don't know the answer to that.

[Colin Barker, Director, Softwood Lumber Division, Department of Foreign Affairs, Trade and Development]

No, I don't have that off the top of my head either, but I can say that the comparator that the U.S. Department of Commerce chooses to use in this instance, as my colleague mentioned, is what we feel is inappropriate, because there are different market conditions, different species in each province and different local markets for those species, so that really does impact the stumpage price in those provinces.

[Michael Owen, Acting General Counsel and Executive Director, Softwood Lumber Litigation Division, Department of Foreign Affairs, Trade and Development]

If I may add something, it's important to recognize that markets for stumpage or standing timber are inherently local. Standing timber, like a lot of natural resources, is inherently a residual value good. To give you a very practical simple example, a tree that's 200 kilometres away from a mill is going to be worth less than the exact same tree if it's 50 kilometres away from a mill, and that's because hauling costs are going to be less expensive because the distance is shorter.

Other dynamics play into this, as my colleague Mr. Barker touched on. Certain species are worth more than other species. If you have a stand that has a lot of western red cedar, for example, which is a high-value product, that stand is going to be worth more than stands with other species, and local demand....

I think one of the very important things to know is that stumpage markets in each province.... Even within British Columbia, for example, you have a coastal market and you have an interior market, and even within the interior market, you have a lot of sub-markets, so the pricing is very idiosyncratic and dependent on the local circumstances. That's a position that we've taken and tried to explain, frankly, to the U.S. Department of Commerce.

[Ben Lobb, Conservative, Huron—Bruce, ON]

Doesn't the U.S. have the same challenges?

[Michael Owen]

Absolutely it does, and one of the things that we pointed out—

[The Chair, Liberal, Judy Sgro]

I'm sorry, but Mr. Lobb's time is up. We are going on to Mr. Sheehan for five minutes.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

Thank you very much for the opportunity to ask some questions today on this very important matter.

Picking up on what the minister was talking about on how this is a tax on Americans, I want to know if any of our witnesses might have a sort of calculation for us. We used to kind of figure it out, and it's a little bit of a déjà vu, with the steel tariffs. When this trade committee was down in the United States, we mentioned that there would be a tax and that it hits hardest the middle class and those trying to join it.

I just want to know, through you, Madam Chair, if one of our witnesses would have a current calculation. I heard different numbers through time, but right now, what would this equate to for a middle-class American?

[Arun Alexander]

Madam Chair, the latest statistics and data that I have are from the National Association of Home Builders, which did a study and brought it to the attention of the U.S. administration. Their statistics indicate that for an average middle-class house in the United States, the price has increased by between $35,000 and $40,000 because of the tariffs. Also, for multi-unit housing, which is probably used more by lower-income persons, the increase in price is around $19,000.

We are arguing vehemently, just as the National Association of Home Builders is, that the tariffs on Canadian softwood lumber are having a significant impact on the price of housing in the United States, especially in light of the recovery and with regard to affordable housing.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

Well, I think that highlights and underlines just how foolish these punitive tariffs are and have been since the 1980s, and I know that, but it's very difficult now in particular.

Madam Chair, one of the things this committee was really good at was kind of getting in the face of American politicians. I think it behooves us.... I am not going to delve into it now, but we can discuss it, perhaps during a virtual meeting, with some of our American counterparts through the embassy just so that we can pound in that message.

The members who are on this committee know full well how difficult it is to get Americans' attention with so many things competing for attention, but when you bring this to them, a lot of times they do not know about it, and a lot of times they greet it with shock. They say, “What?” when we say, “Your constituents are paying $35,000 to $40,000 more for a middle-class home”, and for the lower-class people, the $19,000 is like a million bucks. They can't afford it. It's just silly.

Thank you. I just wanted to make that point, Madam Chair.

I also want to thank you for that work. What kinds of other programs are available to the forestry sector to help them deal with this new tariff? We had the SIF program before. I know that Domtar in northern Ontario and its Espanola mill got an investment of about $57 million in 2019. What kinds of programs are there in the budget or out there that these companies that are affected by this situation can use to continue to support themselves and the industry?

Through you, Madam Chair, that is for one of the witnesses.

[Arun Alexander]

Thank you very much. Maybe I'll ask my colleague Mr. Barker to respond to that question.

[Colin Barker]

Thank you.

As has been noted by the minister, we did institute a softwood lumber action plan shortly after the initial duties of over $800 million were implemented, and that was supplemented in 2019 by a further $250 million. Primarily those funds go to the projects that look at innovative products and export strategies to other markets overseas beyond the United States. That's the type of funding that has been provided.

Of course, during the pandemic, forestry companies were also able to access all of the COVID response programs that were available to all companies in Canada, and those certainly also helped the forestry sector get back on its feet quite quickly after the initial pandemic shutdowns back a year ago. Within a very short period of time, mills were able to get back to open and running once they made their facilities secure for their workers, and they are now almost completely back up to their pre-pandemic production levels.

[The Chair, Liberal, Judy Sgro]

Thank you, Mr. Barker.

We now go to Mr. Savard-Tremblay for two and a half minutes, please.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Thank you, Madam Chair.

I'd like to ask you about your internal read on the situation. Luc Bouthillier, who teaches forest policy at Université Laval, said he doubts that the U.S. will actually impose the duties given that the home building and renovation craze is even hotter in the U.S. than in Canada.

He did say, though, that if the duties were to materialize, they could have an interesting impact on Canadian producers and consumers. It would make more financial sense for Canadian producers to sell in Canada because they wouldn't have to pay a 20% tax. They could sell their products on the Canadian market with 20% more in their pockets. Even though the domestic market is smaller than the U.S. market, more lumber would be available for domestic use, including in hardware stores.

That was Mr. Bouthillier's take, which is up for debate, of course. Do you think the Biden administration really intends to significantly raise tariffs?

[Arun Alexander]

Madam Chair, it is our hope and it is our expectation that continued litigation under the WTO, the NAFTA, and the CUSMA will bring the United States back to the negotiating table in good faith. This has been a strategy that Canada has used successfully in previous lumber disputes, and we believe it will be successful this time as well.

With regard to the administration, all I can say is that lumber disputes between Canada and the United States have occurred during both Republican and Democratic administrations. We are hopeful that we can have some victories in the litigation, and also that our strong advocacy in the United States, especially with regard to the increase in prices for U.S. consumers and the tax that these duties put on U.S. home purchasers, will bring the U.S. back to the negotiating table.

[The Chair, Liberal, Judy Sgro]

You have 30 seconds, Mr. Savard-Tremblay.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

I want to make sure I understand what you said.

You are saying there is still a real possibility—a probability, even—that the U.S. will impose the tariffs. Is that right?

[Arun Alexander]

I'm assuming you're referring to the second administrative review of tariffs.

We will do our best through advocacy and working with our strong allies in the United States, including the National Association of Home Builders, to ensure that the tariffs are not imposed. If they are by chance imposed, we will take strong litigation measures to challenge those tariffs under CUSMA.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We go to Mr. MacGregor for two and a half minutes, please.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

Thank you, Chair.

To the officials, I'd asked the minister previously about how much longer Canada can afford for this dispute to go on. I wanted to put that in the context of lumber prices. I believe the price today is hovering around $1,327 per thousand board feet, compared to January, when it was $649. That gives you a sense of where we're at in the lumber price world.

Does the department have a sense of at what price point—assuming lumber goes down in the foreseeable future—these duties will start to cause more harm on our industry? With the high lumber prices right now, our mills are doing very well. They've had to take on more shifts and hire more people. There's a huge demand for the product right now. At what price point will we see these duties start to levy more harm on our industry? Do you have any information on that point?

[Arun Alexander]

Madam Chair, it's difficult for us to say at what point that would start to affect Canadian industries. It would probably vary for each mill and each individual circumstance.

At this point, I think the increased prices are—from what I understand from the National Association of Home Builders—very demand-driven. There's been some pent-up demand during the pandemic as people do work on their houses and build new decks. Also, there was some pent-up demand because the housing construction market hit a lull during the height of the pandemic, and there is some rebound from there. It's difficult to say if the prices will go up or down or how long this demand will stay, but it is something that we are monitoring very closely.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

I've heard reports anecdotally that people are using their vacation money to do renovations.

I asked the minister about the anticipated cost of our litigation, both under the WTO and under CUSMA. Do you have any figures on that, and how it compares with previous amounts that we've spent?

[Arun Alexander]

I don't have exact figures on that on hand. I can say that the litigation before the WTO is done by government counsel, so there is no added cost to it. Some of the litigation before the CUSMA and the NAFTA panels is done by private sector law firms that work for the Government of Canada. There's a litigation cost associated with that, but I'm sorry—I don't have the exact numbers.

I might ask Mr. Barker if he knows that.

[The Chair, Liberal, Judy Sgro]

The time is up. If Mr. Barker gets to answer another question, maybe he can throw that information in if he has it with him.

We'll go on to Mr. Lewis for five minutes, please.

[Chris Lewis, Conservative, Essex, ON]

Hello, Madam Chair. It's really a pleasure to be back here at international trade. Thank you so very much.

I have a few comments. First and foremost, I remember all the time we spent on CUSMA and all the discussion around softwood lumber and how we were going to keep that out of CUSMA.

I do recall Deputy Prime Minister Freeland coming to committee. Subsequent to that, four of us—four Conservatives—actually wrote an open letter to her and gave her a couple of questions and/or suggestions.

This is quoted from the letter that I personally signed. It said:

Further, we recommend that you appoint a panel of experts to evaluate softwood lumber products not included on the Export Control List, including finished wood products under codes 4407 and 4409.

I wonder if any of the witnesses could perhaps enlighten me and tell me if that expert panel has happened and/or if the government is part of that.

[Arun Alexander]

Thank you very much for that question, honourable member.

Madam Chair, I think I may once again turn to Mr. Barker, because I'm not aware of that.